Now, small towns spend big on luxury goods

November 23, 2006 12:03 IST

Move over Delhi and Mumbai - Surat, Jaipur and Ludhiana are emerging as big spenders on luxury goods. Shilu Kumar is a fashion entrepreneur and the lady behind the high-end fashion brand 'Pashma'. She retails in over 30 countries, and her company has seen an annual turnover of $35 million. Shilu is one of the 8 million consumers in India who can afford a Gucci or a Prada without batting an eyelid.

According to a recent Technopak study, there are 16 lakh (1.6 million) homes in India, which have an annual income of over Rs 45 lakhs (Rs 4.5 million) and is expected to grow at 14 per cent. These homes annually spend at least Rs 400,000 on premium and luxury products and services. But what is most of this money being spent on? Fashion entrepreneur, Shilu Kumar told CNBC-TV18, "I spend most on watches. I also spend on handbags and sarees."

Though housing, travel and education currently top the spending priorities for the affluent class. While Delhi and Mumbai have been the traditional big spenders, it's tier two cities like Jaipur, Surat and Ludhiana that are giving them a run for their money.

According to Technopak Advisors, clothing and accessories are the luxury categories most ready for takeoff but significant growth will only be seen in the next 2-3 years. Associate Vice President, Technopak, Saloni Nagia says, "One of the biggest hurdles is lack of a retail environment and the required infrastructure. Secondly, only 10 per cent of the consumers who can afford luxury are oriented towards luxury goods."

So, while big brands like Escada, Alfred Dunhill get ready to hit the Indian market, they will need to invest in low-key but innovative ways to create brand awareness. For instance, Valentiono, in spite of being a well recognised global brand, has been active on the fashion events circuit to draw in consumers, who may not know the difference between St Valentine and Valentino!

General manager, India, Valentino, Neha Dagar says, "We do in-store promotion and we have tied up with designers like Manish Malhotra."

Meanwhile accessories, fragrances and footwear have the attention of the affluent Indian consumer, products like cigars, cufflinks and furniture continue to see low penetration.